8 steps to prepare for the high cost of child care

Get first-hand accounts on how to tackle child care costs and learn strategies to ease the expense—and stress—on your family.

For working parents, child care is an invaluable resource that enables them to pursue careers and allows their kids to thrive in an environment that provides social interaction and security. Though the cost of this service continues to rise, there are steps families can take to ensure that their kids are receiving the support they need.

According to Child Care Aware of America, the average price of child care has risen between 1.1% to 5% every year since 2018. The study also found that this cost accounts for about 10% of a married couple’s income – 3% above the U.S. government’s recommendation – and can exceed average rent payments by at least 25% nationwide if families have two or more kids.

To help, we’ve outlined some considerations that both couples and single parents can take to budget for child care costs and provided some thoughts from real-life families who are making it work.

1. Get creative about your child care options

A tight budget can get squeezed even more when day care gets added into the mix. Before plunking down a lot of cash for a high-priced child care center consider these alternatives:

• Turn to friends and family.
• Look into a babysitting co-op, trade babysitting with a friend, or split the cost of a nanny with another family.
• Consider family day care at a private home.
• Ask about child care benefits at your work (see next tip.)

If you can save money this way, consider investing what you would have spent on a full-priced child care center.

“My retired husband is "grandpa daycare" for our 3-year-old granddaughter. In exchange for our watching her, her parents make monthly contributions to her college fund instead.”  
- Carol S, greater Seattle

2. Use a flex spending account

Luckily, there are some great tax breaks that can make child care costs less expensive. For instance, when paying for day care, use a dependent care flexible spending account (set up through your employer). It allows you to use pretax dollars to pay for qualified out-of-pocket dependent care expenses, potentially leading to significant cost savings.

Or…

3. Use available tax credits

…if you don’t have a flex spending option through your employer, think about using the child and dependent care credit. To qualify for the credit, your child care costs must be spent on care needed to let you work or seek work. Keep in mind there is a maximum deduction amount and that other rules apply. 

4. Comparison shop

When looking for care, consider the costs of preschool versus a nanny or nanny share, and the pros and cons of each. And remember that costs decline as your child ages; infant rooms are the priciest due to teacher-child ratios. Also, see if the price per child goes down if you have multiple children being cared for.

“I asked my daycare for a discount since I have 3 of them and we’ve been with them for 5 years.” - Ashley M., greater L.A.

5. Consider changing jobs

Consider whether a more flexible job might lead to cost savings on child care. If you’re married with young children, can one of you work evenings so a parent is always home? If you’re a single parent, can you shift your hours to accommodate child care?

“We have had to juggle schedules to make amazing child care fit our budget. Last year we spent $1,500 a month instead of $1,800 a month but I had to pick her up at 4 pm instead of letting her stay till 6 pm.”  
- Samantha I., greater New Jersey

6. Budget for extra expenses

When budgeting for child care, remember that sending your child to a preschool is just one possible expense. Summer day camps, before- and after-school programs and babysitters are all possible expenses that you should consider when calculating your yearly child care costs. If possible, try to budget for family time too.

“My child care is more than my mortgage. It prevents us from doing fun things and adventures with the kids.”  
- Ashley M., greater L.A.

7. Consider your family’s values and priorities when it comes to careers

The average cost of child care per year varies from $5,300 to more than $17,000 depending on where you live and the type of care you choose, according to the U.S. Department of Labor. Making the numbers work can be tough, and for some it might not make sense to keep working.  

“About half of my paycheck goes to my child's daycare, and that’s a full-time teacher salary.”  
- Samantha I., greater New Jersey

If you love your job or are trying to build your career, then there’s more to consider than just your salary. But if one parent can stay at home with the kids, it might be an option worth talking about.  

8. Learn about child care assistance programs

There are a number of government programs that can help you pay for child care. 

Some states and territories offer financial assistance to low- to moderate-income families and provide services to support children’s early learning and development, mental wellbeing and physical health. 

There are also initiatives that specifically help military, native Hawaiian, native Alaskan and American Indian families with child care costs. 

For more information about these programs and their eligibility, go to childcare.gov. 

Want to learn more about tackling tough money topics just like this? Explore more articles about personal finance.